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Title: Correlated equilibrium under costly disobedience
Authors: Özdoğan, A.
Sağlam, İsmail
Keywords: Correlated equilibrium
Disobedience cost
Issue Date: 2021
Publisher: Elsevier B.V.
Abstract: We extend Aumann's (1974) model of correlated equilibrium by requiring each player to bear an exogenously given cost if s/he disobeys the recommendation of the mediator. Calling the modified solution the costly correlated equilibrium (costly-CE), we show that in any finite normal-form game that has an unpure Nash equilibrium, the set of costly-CE strictly expands even with an arbitrarily small increase in the disobedience cost provided that the game is non-trivial and there is room for expansion. We also study the effects of the disobedience cost on the total welfare of players and the value of mediation. © 2021 Elsevier B.V.
ISSN: 0165-4896
Appears in Collections:İktisat Bölümü / Department of Economics
Scopus İndeksli Yayınlar Koleksiyonu / Scopus Indexed Publications Collection
WoS İndeksli Yayınlar Koleksiyonu / WoS Indexed Publications Collection

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